Short thread: major note of caution needed with this Bank of England house price crash forecast story. Now (clearly) I wasn’t in cabinet & wasn’t privy to what was discussed. But I have a strong suspicion people are getting the wrong end of the stick here. Let me explain: 1/
The past few of years the Bank has run stress tests to see how well capitalised the banking system is. The fictional scenario is v ugly: house prices down 33%, unemployment up over 9%, interest rates up to 4%. Worse, in many senses, than what UK went through in the crisis 2/ 
These stress tests are explicitly not designed as forecasts. They are BEYOND WORSE CASE SCENARIOS which, like caps lock sentences, are supposed to shock the city into safe balance sheet behaviour. The good news is last yr the UK banks almost all passed 3/
Mark Carney has said in public a number of times that he is worried about a no deal, before adding that the financial system would be able to withstand it. As if to prove it he has then trotted out that stress test scenario: look, the banks can even survive THAT! 4/
Yes: part of his point behind such illustrations was that Brexit could indeed be bad news for house prices etc. It could be really bad. But 35%…? Not likely. Even the Treasury’s worst case scenario for house price falls pre-referendum was literally HALF that 5/
Mr Carney prob trotted out similar lines at Cabinet today. But someone there seems to have gotten the wrong end of the stick and has leaked that this was a Brexit-specific forecast/scenario. No. This (below) is the Bank’s stress test scenario. Compare to my 2nd tweet in thread 6/
I don’t mean to undermine news stories running tonight. Those reporters were briefed on the cabinet meeting & are reporting what they’re being told. But I suspect what they’re being told isn’t quite right. I’d be amazed if the BoE was really forecasting anything like this 7/
It’s the same problem as happened before the referendum. Most of the economic community produced sensible analysis warning of risks around Brexit. But (& @George_Osborne deserves some of the blame for this) in the end all everyone remembers was that scary HMT recession warning 8/
What if the same thing happens again? I’m willing to bet if the UK crashes out of the EU house prices won’t crash 35%; interest rates won’t suddenly leap to 4%. Then, because of these stories, the BoE’s credibility will be further undermined. Along with their fellow economists 9/
